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Twitter’s Maturing Monetization

Posted on Tuesday, Apr 30th 2013

After months of “will it or won’t it?”, it seems that the seven-year-old Twitter may be getting ready for a much-awaited IPO. Followed by the earlier management restructuring, Twitter’s strong growth is also fueling such speculation.

Twitter’s Financials
The network was estimated to have more than 500 million registered users and more than 200 million active users tweeting 400 million tweets a day. Compare that with Facebook’s 1.2 billion users and Twitter is comparatively much smaller. But their growing membership is helping them turn in more revenues.

According to revised projections from eMarketer, Twitter’s advertising revenues are projected to grow from an estimated $288.3 million last year to $1.33 billion by the year 2015. eMarketer projects Twitter’s revenues to grow 102% this year to $582.8 million. Twitter is expected to generate more than 53% of their revenues from mobile advertising this year. That is a significant achievement compared with the absence of mobile advertising revenues in 2011. By 2015, mobile advertising on Twitter is projected to grow to 60% of their total revenue share.

Twitter’s Advertising Growth
Twitter’s advertising revenue growth is also being benefited by the recent study conducted by Nielsen. The researcher found that increase in Twitter chatter bears a correlation to the improvement in TV program ratings. Within the U.S, nearly 80% of a mobile device owners watch TV on their mobile devices at least a few times a month, and nearly 40% of a mobile device owner visit a social networking site such as Twitter while watching a TV show. The study revealed that as Twitter chatter volume increases by 4.2% among 18- to 34-year-old viewers and by 8.4% among 35- to 49-year-olds, TRP ratings go up by 1%.

It’s no wonder that last week, Twitter announced a tie-up with Publicis’ Starcom MediaVest Group, one of the largest buyers of advertising. Together, the two players will work on creating a social TV lab that will conduct research on improving the efficiency of social media ad campaigns. In additom, the deal also grants Starcom’s clients, which includes names like Walmart and Coca-Cola, with preferred ad slots on Twitter. The terms of the deal were not disclosed, but it is expected to be “worth hundreds of millions of dollars over several years.

Last month, Twitter released self-service ad tools today that will cater to demographic targeting. Advertisers will have access to Twitter’s control panel for reporting, analytics, and optimization. They will be able to segment the market based on categories such as interests, mobile device used, Twitter handles and gender. Earlier this month, they also began keyword targeting that will allow advertisers to choose their target audience based on the content of the tweets users write.

Twitter’s Media Expansion
Twitter is also expanding their presence with music and video content. They recently released Twitter #Music as a separate app for the iPhone through the App Store. The app helps users find popular music on Twitter based on the bands that they follow. It also shows them details about emerging popular music, shares what their friends are listening into and recommends artists and bands based on their preferences. Users can go to the artist’s Twitter profile pages and see what artists they follow and listen to. Earlier this month, they also acquired Australia based music recommendation and streaming company, We Are Hunted, as part of this focus.

Within video, Twitter released a video app earlier this year. Vine is a mobile app that lets users capture and share videos that loop. Like Tweets, the videos will be really short with a maximum length of six seconds. For now, the app is available for iOS, but will soon be made available for other mobile systems as well.

Twitter is yet to confirm or deny plans of an IPO this year. Where some analysts believe that Twitter is ready to go public, there are others who believe that the company is waiting to turn profitable before they seek public funds. Twitter does not disclose their financials and the extent of their profitability is not known. However, recent reports by Twitter’s former board member, Fred Wilson, did hint that the company was already turning in profits. Whether or not they go public, the market estimates their current valuation at $10 billion.

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